To achieve higher returns in the stock market, besides doing more homework on the companies you wish to buy, it is often necessary to take on higher risk. A most common way to do that is to buy stocks on margin Day trading options can be a successful, profitable strategy but there are a couple of things you need to know before you use start using options for day trading Learn about the put call ratio, the way it is derived and how it can be used as a contrarian indicator Put-call parity is an important principle in options pricing first identified by Hans Stoll in his paper, The Relation Between Put and Call Prices, in It states that the premium of a call option implies a certain fair price for the corresponding put option having the same strike price and expiration date, and vice versa In options trading, you may notice the use of certain greek alphabets like delta or gamma when describing risks associated with various positions.

What are the Benefits & Risks?

They are known as "the greeks" Since the value of stock options depends on the price of the underlying stock, it is useful to calculate the fair value of the stock by using a technique known as discounted cash flow Risk Warning: Stocks, futures and binary options trading discussed on this website can be considered High-Risk Trading Operations and their execution can be very risky and may result in significant losses or even in a total loss of all funds on your account.

You should not risk more than you afford to lose. Before deciding to trade, you need to ensure that you understand the risks involved taking into account your investment objectives and level of experience. Information on this website is provided strictly for informational and educational purposes only and is not intended as a trading recommendation service. The Options Guide.

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Overview Conversion Reversal Dividend Arbitrage. We'll use a fictional firm called Cory's Tequila Company.

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Let's say that on May 1st, the stock price of Cory's Tequila Co. In reality, you'd also have to take commissions into account, but we'll ignore them for this example. Remember, a stock option contract is the option to buy shares; that's why you must multiply the contract by to get the total price. You almost doubled our money in just three weeks! You could sell your options, which is called "closing your position," and take your profits—unless, of course, you think the stock price will continue to rise Say we let it ride.

This is leverage in action. So far we've talked about options as the right to buy or sell the underlying. This is true, but in actuality a majority of options are not actually exercised. You could also keep the stock, knowing you were able to buy it at a discount to the present value.